The Secret to Cost Efficiencies? Relationships

The surest way to consistent, effective cost containment is building solid alliances with trade partners

September 14, 2017

I grew up a builder’s son and spent a lot of time on jobsites from an early age. Working alongside trades and earning money as a general laborer at a young age was great, but the real benefit was exposure to contract negotiations, where I’d see my father negotiate price, payment terms, and future work on nearly a daily basis (Image: Jarmoluk via Pixabay).

Often I’d see my dad negotiate price after the job was finished, which ultimately created a revolving door of tradesmen. There were only a handful of contractors that I would see more than a couple of times; most of them would get fed up with constant negotiation and move on to something better. My father spent countless hours trying to find good trades instead of creating lasting relationships with the ones he already had.

THE TALE OF BOB AND JOE
Fast forward three decades, a college education, 10 years in the field, and 20 years in architecture . Recently I got a call from a builder I’ll call Bob; I already knew how the conversation would go. Our firm had sent him minor changes to a plan that he has built several times. He called to complain about the invoice for the completed job and tried to negotiate a lower cost. I’ve been thru this numerous times with Bob; it’s a waste of time for us both. The argument he habitually makes is that the invoice is slightly higher than we estimated before starting the project, and that the price shouldn’t go over the estimate. What Bob failed to realize is that he called me at least 7 times while the project was under way and made several changes long after we estimated the cost.

After spending 20 frustrating minutes on the phone, I ended up lowering the invoice just to end the call. I made a mental note to add additional time to the next job we estimate for Bob in order to cover the cost of the lost revenue on this one, and time I’ll have to spend on the phone with him next time. Bob’s insistence on negotiating after the fact reduces our profits and lowers his company a rung or two as our builder of choice . The way we see it, builders of choice become true partners and always strive for a win-win relationship.

A week later, I got a call from Joe, who never negotiates price with us. Joe knows what architecture costs, and he knows what it means to get priority service. Joe first asks if his company’s payments are up to date (always a good way to start the conversation). He then goes on to tell me he’s in a bind and needs my help. It turns out Joe has a sold job for which he needs drawings for right away or he’ll lose the sale. I tell Joe we can meet his impossible deadline but he may incur additional costs for overtime. He agrees and we get to work.

The difference between Bob and Joe is simple: Joe knows how and what to negotiate. There are many other things that are worth more than money. Time is one of them.

STOP WASTING TIME
Joe calls me from time to time to ask for minor revisions to his plan portfolio. If the changes are small, we take care of them at no charge and generally get them done within hours, not days or weeks. We do that because Joe has made himself a builder of choice. He doesn’t complain about price and his invoices are always paid on time. We have a great working relationship that’s win-win.

Building relationships translates to saving time, and creating efficiencies. If you find yourself constantly negotiating price with your trade partners, you’re wasting your time. Develop a two-way relationship built on trust and performance, and it will soon be clear that lowest bid rarely translates to lowest total cost.

Eric Tiffin has spent his entire life in the residential construction and architecture industry. He has worked in the trades and as a licensed builder, and is production director of TK Design, a nationally recognized architecture. As a consultant for True North Development, Eric has experience working with a range of design types and construction methods in the United States and abroad.